Environmental decentralization, digital finance and green technology innovation

Financial development is an important driving force for promoting green technology innovation. However, traditional finance faces obstacles in supporting these innovations, and it is unclear how this dilemma can be solved. This paper seeks new solutions using digital finance to solve this dilemma. Using panel data on listed companies and cities in China, this paper analyzes the impact of digital finance on green technology innovation. The results show that (1) digital finance significantly promotes green technology innovation, and this finding holds even through serial robustness tests. The promotion effects are attributed to a reduction in corporate financing constraints, industrial structure upgrading and manufacturing development. (2) Digital financial development has a greater positive effect on green technology innovation in small-scale enterprises. Digital financial development can better promote green technology innovation in regions with higher pollutant emission intensity and where local government has stronger governance capacity. In addition, manufacturing and nonstate economic development help to better exploit the green technology innovation effect of digital finance. (3) With the improvement of environmental decentralization, digital finance strongly promotes green technology innovation, indicating that the downward trend of environmental responsibility will better alleviate the mismatch between the supply and demand of green innovation investments. In order to strengthen enterprises' green technology innovation capacity and solve serious environmental pollution problems, it is suggested that traditional financial institutions should actively embrace this digital trend. Meanwhile, government should develop differentiated innovation incentive policies to increase the technological innovation investment of manufacturing and private enterprises while also promoting the reform of the environmental decentralization system and strengthening supervision of central environmental protections.